![[UK] HMRC’s 7,400 active furlough fraud cases are ‘the tip of the iceberg’](http://globalpayrollassociation.com/cdn/shop/articles/bigstock-Iceberg-in-ocean-Hidden-threa-282762274_1200x.jpg?v=1626184072)
A number of advisers to limited companies have characterised the 7,400 confirmed active furlough fraud cases by HMRC as only ‘the tip of the iceberg’, Contractor UK reports.
Forgotten Ltd is concerned that the sheer weight of “compliance interventions” relating to the Coronavirus Job Retention Scheme could even be seized upon to disallow help for directors.
Responding to HMRC saying its COVID-related probes now total 12,000 (of which 7,384 are related to the CJRS), the campaigner said “fraud risk” is partly why ‘DISS’ has not been adopted.
“The Director Income Support Scheme provides [HM Treasury with] the least likely scheme to be defrauded, yet still they reject it [partly due to] fraud risk,” Forgotten Ltd said.
“[So] despite the DISS being created as the gold standard for transparency [limited company directors] are, apparently, still a bigger fraud risk than, well, everyone else.”
According to HMRC intervention figures, the furlough scheme is behind the highest number of probes to recover funds through tax avoidance, evasion, fraud, and non-compliance.
The figures - obtained by law firm BLM under the Freedom of Information Act - also show that the CJRS has returned the highest number of arrests. The figure stood at five as of March 28, 2021.
However, BLM says 5,020 interventions by HMRC are underway in relation to the Self-Employment Income Support Scheme too and 424 are underway relating to Eat Out to Help Out. And many further HMRC probes are incoming.
“It is expected the number of interventions will continue to rise, as further errors and fraudulent behaviours are uncovered,” BLM’s investigations lawyer Iskander Fernadez said.
“It is easy to say that more should have been done by way of due diligence on each applicant [by HMRC] but given the scale of the pandemic…it is hardly surprising that gaps emerged.”
Innocent business owners need not worry
On June 28, adviser Jesminara Rahman - boss of Tax Resolute UK and previous tax office worker - confirmed that HMRC took a ‘process now check later’ approach to administering COVID aid to taxpayers. But now the checking stage is absolutely underway, directors who have made more than minor mistakes will not be given a pass and rightly so, said Ms Rahman.
“For any furlough claim…an audit trail has to be kept underlining the furlough claims including how it was calculated and communications with the [grant recipients].
“If minor errors have been made without deliberate intention, then business-owners do not need to worry,” Ms Rahman told Contractor UK adding this caveat:
“The issue will be where larger discrepancies have taken place and no reasonable explanations can be provided for why there is such an overclaim.
“HMRC will then come down hard on any potential furlough fraud - as they should, as the CJRS grants were provided in times of need - not for greed.”
HMRC is right to investigate
On June 28, the architect of DISS agreed that company directors do not get a pass just because the government’s income support for them during the pandemic continues to be scant.
“I don’t think it is any surprise that HMRC are opening investigations and rightly so,” Rebecca Seeley Harris, who drew up and submitted DISS in December told Contractor UK.
“The rules were quite clear for those businesses that were using the CJRS. It is unfortunate that the small salary option was only open for the limited company directors, but they still had to comply with the law.”
For directors who did not comply, penalties in relation to incorrect claims can be as much as 100 per cent of the value of the claim, Tom Wallace - director of tax investigations at WTT Consulting - said.
“[And such a penalty is] in addition to paying back the incorrect claim,” he cautioned in a post.
“[So] if you have made a claim in relation to any of the COVID support schemes and you are unsure if your claim was correctly made, now is the time to have it looked over and checked.”
Unlike company directors who make genuine mistakes, fraudsters have taken full advantage of schemes like CJRS which were designed and rolled out quickly amid pandemic “uncertainty,” BLM said.
“In June, HMRC reported that almost £18 billion has so far been paid out under CJRS,” the firm added.
“[But given] Bounce Back Loans and the Coronavirus Business Interruption Loan Scheme, it is not unreasonable to suggest that we are talking about [COVID support scheme] losses in the billions through fraudulent activity.”
More than 91,000 fraud tips
Of all the UK government’s COVID support schemes, Tax Resolute says it is unsurprising that HMRC’s focus is on the CJRS (though the SEISS has paid out £24.5bn, a far higher figure).
“The government has invested £100 million in a Taxpayer Protection Taskforce [comprised] of 1,265 HMRC staff, [although they work on both] CJRS and SEISS,” Ms Rahman said.
“[And] there have been over 91,000 fraud tip-offs on HMRC’s fraud hotline.”
Source: Contractor UK
(Links and quotes via original reporting)
A number of advisers to limited companies have characterised the 7,400 confirmed active furlough fraud cases by HMRC as only ‘the tip of the iceberg’, Contractor UK reports.
Forgotten Ltd is concerned that the sheer weight of “compliance interventions” relating to the Coronavirus Job Retention Scheme could even be seized upon to disallow help for directors.
Responding to HMRC saying its COVID-related probes now total 12,000 (of which 7,384 are related to the CJRS), the campaigner said “fraud risk” is partly why ‘DISS’ has not been adopted.
“The Director Income Support Scheme provides [HM Treasury with] the least likely scheme to be defrauded, yet still they reject it [partly due to] fraud risk,” Forgotten Ltd said.
“[So] despite the DISS being created as the gold standard for transparency [limited company directors] are, apparently, still a bigger fraud risk than, well, everyone else.”
According to HMRC intervention figures, the furlough scheme is behind the highest number of probes to recover funds through tax avoidance, evasion, fraud, and non-compliance.
The figures - obtained by law firm BLM under the Freedom of Information Act - also show that the CJRS has returned the highest number of arrests. The figure stood at five as of March 28, 2021.
However, BLM says 5,020 interventions by HMRC are underway in relation to the Self-Employment Income Support Scheme too and 424 are underway relating to Eat Out to Help Out. And many further HMRC probes are incoming.
“It is expected the number of interventions will continue to rise, as further errors and fraudulent behaviours are uncovered,” BLM’s investigations lawyer Iskander Fernadez said.
“It is easy to say that more should have been done by way of due diligence on each applicant [by HMRC] but given the scale of the pandemic…it is hardly surprising that gaps emerged.”
Innocent business owners need not worry
On June 28, adviser Jesminara Rahman - boss of Tax Resolute UK and previous tax office worker - confirmed that HMRC took a ‘process now check later’ approach to administering COVID aid to taxpayers. But now the checking stage is absolutely underway, directors who have made more than minor mistakes will not be given a pass and rightly so, said Ms Rahman.
“For any furlough claim…an audit trail has to be kept underlining the furlough claims including how it was calculated and communications with the [grant recipients].
“If minor errors have been made without deliberate intention, then business-owners do not need to worry,” Ms Rahman told Contractor UK adding this caveat:
“The issue will be where larger discrepancies have taken place and no reasonable explanations can be provided for why there is such an overclaim.
“HMRC will then come down hard on any potential furlough fraud - as they should, as the CJRS grants were provided in times of need - not for greed.”
HMRC is right to investigate
On June 28, the architect of DISS agreed that company directors do not get a pass just because the government’s income support for them during the pandemic continues to be scant.
“I don’t think it is any surprise that HMRC are opening investigations and rightly so,” Rebecca Seeley Harris, who drew up and submitted DISS in December told Contractor UK.
“The rules were quite clear for those businesses that were using the CJRS. It is unfortunate that the small salary option was only open for the limited company directors, but they still had to comply with the law.”
For directors who did not comply, penalties in relation to incorrect claims can be as much as 100 per cent of the value of the claim, Tom Wallace - director of tax investigations at WTT Consulting - said.
“[And such a penalty is] in addition to paying back the incorrect claim,” he cautioned in a post.
“[So] if you have made a claim in relation to any of the COVID support schemes and you are unsure if your claim was correctly made, now is the time to have it looked over and checked.”
Unlike company directors who make genuine mistakes, fraudsters have taken full advantage of schemes like CJRS which were designed and rolled out quickly amid pandemic “uncertainty,” BLM said.
“In June, HMRC reported that almost £18 billion has so far been paid out under CJRS,” the firm added.
“[But given] Bounce Back Loans and the Coronavirus Business Interruption Loan Scheme, it is not unreasonable to suggest that we are talking about [COVID support scheme] losses in the billions through fraudulent activity.”
More than 91,000 fraud tips
Of all the UK government’s COVID support schemes, Tax Resolute says it is unsurprising that HMRC’s focus is on the CJRS (though the SEISS has paid out £24.5bn, a far higher figure).
“The government has invested £100 million in a Taxpayer Protection Taskforce [comprised] of 1,265 HMRC staff, [although they work on both] CJRS and SEISS,” Ms Rahman said.
“[And] there have been over 91,000 fraud tip-offs on HMRC’s fraud hotline.”
Source: Contractor UK
(Links and quotes via original reporting)